Redline Trading Solutions and IEX

Tue, 17 Dec 2013 10:42:00 GMT

By Mike O'Hara

Earlier this week, Redline Trading Solutions announced that IEX, the new equity trading venue owned exclusively by a consortium of buy-side investors, is using Redline’s InRushTM low latency ticker plant.

This is interesting because Redline’s technology is more typically associated with high frequency trading and smart order routing than with a dark pool committed to operating a fair and balanced market.

Reference Price Accuracy

However, Mark Skalabrin, Redline’s CEO, explains that it is not unusual for a trading venue to adopt a solution such as InRush. In fact, Redline’s technology is already used to provide reference prices at several dark pools in the US.

“We take a lot of care to ensure that we output a very accurate price, which doesn’t always match the regulatory price because it’s calculated from direct exchange feeds. The regulatory price can be different because of the latency involved in the consolidated feed”, says Skalabrin.

“I was originally surprised that dark pools would want to use the Redline low latency market data because dark pools generally match at the midpoint”, he says. “But using our ticker plant gives them a better price for their customers, which avoids the kind of gaming in the market where a trading firm might know that a dark pool is trading with slow information and then trying to take advantage of that situation by sending in orders that could be matched on stale data”.

Mainstream vs FPGA-based Platforms

Regular readers of HFT Review will be aware that many ticker plants are now based around FPGA technology. However, Redline has not gone down this route, preferring the approach of designing software on mainstream hardware. Skalabrin explains why.

“Intel has done a great job of improving their microarchitecture and expanding out the number of cores”, he says, “so we get the same kind of performance through very highly optimised source code as compared to others who need FPGAs to achieve that.

“In addition, our solution can accelerate many more components; FPGAs are good for one piece of the pipeline, but they don’t go very far up the stack. We focus on optimising the whole end-to-end performance”.

Being able to react fast is also important, says Skalabrin.

“Market data and execution are places where people need a high amount of robustness and they need a fast response time when there are problems. We run a continuous integration process where, if a customer has a problem, we can diagnose, fix, qualify and deploy a new release literally in hours. Whereas with FPGAs, people talk about weeks and months to identify and solve problems. That’s just not the right kind of environment for these mission-critical trading systems”.

Future Plans

Looking ahead, Redline now has plans to increase its feed coverage from beyond the USA and Canada. The firm recently opened an office in Hong Kong to support the Asian markets, and is planning a big push over the next six months or so to provide full coverage in Europe.